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Gold Holding its Ground Despite Fed’s Hawkish Turn
Hawkish comments by Fed Vice Chairwoman Lael Brainard triggered a rally in Treasuries yields and an appreciation in the greenback.
Almost 80% of investors are now betting that the Fed will announce an interest rate hike of 50 basis points in its May meeting, as the US central bank seems under pressure to act in order to curb inflation.
Over 80% of investors are now also forecasting that rates will be at 2.75% or above, by the end of the year while around 45% of them are predicting rates to be at 3.00% by then, according to the CME FedWatchTool.
Considering the hawkish mode of the Fed, gold is showing significant resilience, while volatility remains low.
From a technical point of view, gold remains stuck in a lateral trading range between $1,900 and $1,950. Only a clear break of these levels could be seen as a first directional signal, while investors remain in a ‘wait and see mode’ as they watch out for any significant development in the Ukraine-Russia crisis. Read More
Fed’s Hawkish Comments Trigger Fall Below $25 for Silver
Silver has broken below the support zone of $25 per ounce, declining below $24.5. This fall is mostly linked to the increase in U.S. yields, with the 1-year bond yield now at 1.75%, while the 2-year yield is above the 2.50% threshold.
On top of this, the US 10-year yields just hit their highest levels since April 2019. The greenback gained momentum, lifted by the Fed’s warning over the need for a prompt reduction in its balance sheet.
This is another negative factor for commodities, which are usually priced in the U.S. Dollar.
Both gold and energy-related commodities lost ground yesterday. Even so, both WTI and Brent remained positive YTD by over 30%. In this context, silver – after recovering once again to the key level of $25 - fell below $24.5 just after Fed member Lael Brainard's hawkish comments. Read More
Gold prices continue to consolidate above $1,900 as bond yields hit three-year high
The gold market continues to hold its own as bond yields push to their highest level in three years. While rising inflation supports the precious metal, some analysts warn that it faces growing headwinds from rising interest rates and a stronger U.S. dollar.
Wednesday, the yield on 10-year U.S. Treasuries rose to 2.63%, its highest since mid-March 2019. Bond prices have been dropping steadily since Tuesday after Federal Reserve Governor Lael Brainard said that inflation is too high and that the Federal Reserve could reduce its balance sheet faster than expected.
Along with rising bond yields, the U.S. dollar is seeing new momentum as the index looks to retest resistance at 100 points. Currently, June gold futures last traded at $1,930.70 an ounce, up 0.17% on the day.
Rising bond yields are traditionally negative for gold, raising the opportunity costs of holding the precious metal, a nonyielding asset. However, analysts have said that growing market uncertainty and rising volatility are helping gold to withstand the rise in bond yields, at least for now. Read More
187.3 tonnes of gold flows into global ETF market in March
Geopolitical uncertainty created by Russia's invasion of Ukraine and the growing inflation threat generated solid support for gold-backed exchange-traded funds, according to the latest report from the World Gold Council. And this is despite the Federal Reserve embarking on a new aggressive monetary policy cycle.
Wednesday, the WGC said 187.3 tonnes of gold flowed into global ETFs.
"March inflows were the strongest since February 2016, despite a significant rebound in equities and a strong US dollar performance," the analysts at the WGC said in the report. "There were positive flows across all regions during the month, but most came from North American and European gold ETFs." Read More
Gold holding neutral ground as the Fed sees inflation as bigger risk than slower growth
The gold market is holding its ground, trading in neutral territory as the Federal Reserve looks to ramp up its tightening cycle, raising interest rates by 50 basis points and reducing its balance sheet in May, according to the comments made in the minutes from the March monetary policy meeting.
"Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified," the minutes said. "Participants judged that the committee's approach of commencing increases in the target range for the federal funds rate, and indicating that ongoing increases were likely, was fully warranted. Participants judged that it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously."
The minutes also showed that the central bank is ready to reduce its balance sheet.
"Participants also agreed that reducing the size of the Federal Reserve's balance sheet would play an important role in firming the stance of monetary policy and that they expected it would be appropriate to begin this process at a coming meeting, possibly as soon as in May," the minutes said. Read More
World is 'on the cusp of new inflationary era' and adjustment to higher rates won't be easy, warns BIS
In its new outlook, the Bank for International Settlements (BIS) said inflation wouldn't be returning to normal anytime soon, and the world will have trouble adjusting to the new global rate hike cycle.
"After more than a decade of struggling to bring inflation up to target, central banks now face the opposite problem," said the BIS general manager Agustín Carstens. "We may be on the cusp of a new inflationary era. Central banks need to adjust to this new environment, not least by raising policy rates to more appropriate levels. The world economy must learn to rely less on expansionary monetary policies."
One important theme is the retreat of a globalized world, which played a big part in creating deflationary forces during the previous couple of decades. Read More
Gold choppy but lower as FOMC minutes show no hawkish surprises
Gold prices initially erased mild losses and traded firmer in the wake of the just-released FOMC minutes. However, prices have since sold off moderately. Many deemed the FOMC minutes as containing no hawkish surprises, which allowed the precious metals markets to briefly drift higher. Rising bond yields this week are a bearish element for the metals markets. June gold futures were last down $5.00 at $1,922.60 and May Comex silver was last down $0.104 at $24.43 an ounce.
Image Source: Kitco News
Technically, April gold futures bulls have the overall near-term technical advantage amid recent sideways and choppy trading. Bulls' next upside price objective is to produce a close above solid resistance at $1,967.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the March low of $1,888.30. First resistance is seen at today’s high of $1,937.60 and then at $1,950.00. First support is seen at today’s low of $1,916.20 and then at $1,900.00. Wyckoff's Market Rating: 6.0
May silver futures bulls have a slight overall near-term technical advantage. However, prices are in a four-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.16 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at today’s high of $24.68 and then at $25.00. Next support is seen at today’s low of $24.20 and then at the March low of $24.045. Wyckoff's Market Rating: 5.5. Read More
Federal Reserve Minutes; the devil is in the details
While both the FOMC statement and press conference by Chairman Powell informs market participants as to their updated and revised monetary policy, it is the release of the minutes that gives investors much more clarity and insight. As they say, the devil is in the details.
Today the Federal Reserve released the official minutes from the March FOMC meeting, shedding light on their current plans to begin to unwind their balance sheet assets. Beginning in March 2020, the Federal Reserve added roughly $4.6 trillion by purchasing $120 billion monthly of mortgage-backed securities ($40 billion) and U.S. Treasuries ($80 billion), taking their balance sheet assets to just over $9 trillion. According to Federal Reserve Governor Lael Brainard, the Fed plans to use a combination of interest rate increases and a rapid balance sheet run-off to bring the U.S. monetary policy to a more neutral position later this year.
However, the minutes released today indicate that the Federal Reserve will unwind approximately $3 trillion, taking its $9 trillion balance sheet down to $6 trillion over a three-year period. While, on the surface, the Fed is conveying a rapid balance sheet runoff, the reality is that the Federal Reserve’s balance sheet will be approximately $2 trillion above the balance sheet prior to the pandemic. Read More
Gold trades higher ahead of the European open
Gold is trading 0.10% higher heading into the European open at $1924/oz. Silver however has fallen 0.39% and is hovering at $24.33/oz. Elsewhere in the commodities complex, copper is up 0.15% but spot WTI has fallen nearly 1%.
Stocks in the Asia Pac area struggled. The Nikkei 225 (-1.69%), ASX (-0.63%) and Shanghai Composite (-1.39%) all fell overnight. Futures in Europe are indicating a negative cash open.
In FX markets the biggest mover was AUD/USD which fell 0.33%. EUR/USD moved 0.20% higher. In the crypto space, BTC/USD is 0.55% higher and trades at $43,403.
News from overnight: Read More
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
